Last week saw the latest development in the ongoing dispute between Lidl and Tesco relating to Tesco’s Clubcard Prices campaign, which features a yellow circle on a blue background. The High Court ruled on Wednesday[1] that Tesco’s use of its Clubcard Prices logo constitutes trade mark infringement and passing off of Lidl’s logo. In addition, the Court held that Lidl’s logo was copied during the design process, so Tesco was also liable for copyright infringement.
Despite the finding of infringement, Tesco did have a degree of success in its counterclaim against Lidl. Whilst this was not enough to avoid a finding of infringement, the High Court agreed with Tesco that some of Lidl’s trade marks had been filed in bad faith and should be invalidated as a result. According to the decision, Lidl was guilty of “evergreening” its trade marks and obtaining rights solely for use as a “legal weapon”.
Given the reputation of discounters as sailing close to the wind when it comes to infringing the IP rights of household brands, there have been accusations of hypocrisy levelled at Lidl for bringing these proceedings. Those accusations were given short shrift by Mrs Justice Joanna Smith DBE in this latest decision, with the judge considering it unfair and inappropriate to factor Lidl’s commercial practices into her assessment of the present case.
The saga is undoubtedly set to continue, with reports already indicating that Tesco is seeking leave to appeal. Tesco’s Clubcard Prices logo is still prominently displayed in-store, in out-of-home advertising, and on its website, so the decision does not appear to have led to any immediate change in Tesco’s advertising campaign in practice.
High Court Decision
There is a lot to unpack in the 102-page decision in this case, and much will be scrutinised further if the case does indeed progress to the Court of Appeal as suspected. This brief analysis outlines some of the major issues discussed.
Background
Lidl’s claims rely on its rights in the signs shown below (reproduced from the decision):
Lidl objects to Tesco’s use of the logos shown below (also reproduced from the decision), which are examples of Tesco’s Clubcard Prices promotion:
Trade Mark Infringement
This is not a case that turns on confusion; the infringement claim is based instead on Lidl’s reputation. Lidl’s argument was that Tesco’s use of its Clubcard Prices logo dilutes its brand and gives Tesco an unfair advantage, by piggybacking on its reputation as a discounter known for its value proposition. Lidl succeeded on both counts.
One of the criteria that Lidl needed to establish to succeed in its claim of infringement is that, on seeing the Clubcard Prices logo, consumers would make a “link” between Lidl and Tesco. The judge considered this point at length. Evidence of consumer confusion supported the finding of a link, with members of the public who had spontaneously tweeted about Tesco’s Clubcard logo being similar to Lidl’s branding giving evidence at trial on Lidl’s behalf. In addition, Lidl relied on other social media posts about Tesco’s campaign as well as survey evidence which Tesco had commissioned prior to the dispute about the impact of its Clubcard campaign.
Throughout the decision, there are references to Tesco’s internal teams raising various concerns about the Clubcard logo being reminiscent of the Lidl logo. These “internal warning signs” were also considered as satisfying the requirement that there was a link between the Clubcard Prices logo and Lidl.
The Court ultimately held that there was “evidence of both origin and price match confusion/association together with evidence that Tesco appreciated the potential for confusion”. Lidl succeeded in proving that Tesco’s use diluted its brand, leading to Lidl being forced to spend on a corrective advertising campaign to re-educate its customers.
The judge was not persuaded that Tesco had consciously intended to ride on Lidl’s coat-tails. However, the Court did hold that the Clubcard Prices logo caused a “subtle but insidious” transfer of Lidl’s image to Tesco and increased the attraction of Tesco’s prices. This led to a finding that Tesco had taken unfair advantage of the reputation Lidl’s mark has “for low price (discounted) value”.
Counterclaim
As part of its defence of the claim, Tesco sought to revoke and invalidate Lidl’s wordless trade marks. Tesco achieved a modicum of success in its counterclaim, but this had no impact on the overall outcome of the case.
Non-use
The Court held that Lidl’s wordless trade marks had been validly used, even though they had always appeared with the word ‘Lidl’. As such, they could not be revoked for non-use. This is no particular surprise given the authority of Specsavers, but is of interest when considered in the context of Tesco’s parallel bad faith claim.
Bad Faith
Tesco claimed that Lidl’s wordless trade marks were filed in bad faith as (i) Lidl never had any intention to use the mark without the word ‘Lidl’ and that (ii) later filings were made purely to “evergreen” Lidl’s rights.
Despite holding that Lidl had indeed genuinely used its wordless logo in the years since, the Court nevertheless held that, at the time of filing its first trade mark application in 1995, Lidl had no intention to use this mark. As such, Lidl acted in bad faith at the time. The mark was registered purely as a weapon to secure a wider legal monopoly than that to which Lidl was entitled.
This aspect of the decision seems open to challenge considering the finding of genuine use and the finding that Lidl’s 2021 filing for the same mark was filed in good faith. Lidl’s branding has not changed in the meantime; it has always used the same logo. What has changed in the intervening period is that case law has confirmed that use of a logo with words overlaid can constitute use of the background logo too. Prior to that, the position was unclear, but it seems a stretch to infer from this that it would be an act of bad faith for a company to file for its wordless logo, pending clarification of the position from the courts.
Given that the burden of proof lies with Lidl to prove its commercial rationale at the point of filing its first trade mark, and it has been unable to adduce evidence from the period prior to 1995, the finding of bad faith might stick.
Copyright Infringement
The copyright claim related primarily to Lidl’s logo including the ‘Lidl’ name. There was no evidence of actual copying, but the judge commented that “copyists are most unlikely ever to admit copying”. Much was made of the lack of evidence from Tesco’s external branding agency, which seemed to have played a pivotal role in devising the Clubcard Prices logo. Emphasis is also placed on the fact that Tesco seems to have changed its story during the course of the proceedings, starting out with no explanation of the genesis of the logo, but ending up at an argument that the Clubcard Prices logo was an independent creation. The judge concluded that “Tesco’s “story” as presented at trial was full of holes”.
Lidl managed to get over the hurdle of establishing that its relatively simple design was still sufficiently original to qualify for copyright protection as an artistic work, and that a taking of the yellow circle and blue background would constitute a reproduction of a substantial part of that work. The Court went on to hold that Lidl’s logo was copied by Tesco’s external brand agency “as part of their exploratory work commissioned by Tesco and thereafter adopted by Tesco”. Although there is an acknowledgement that there was no deliberate intention on Tesco’s part to evoke Lidl, that did not mean there was no copying.
Comment
Instinctively, a finding of infringement seems harsh given that the subject matter here is simple geometric shapes in primary colours. However, it is difficult to argue against the evidence outlined in the decision. Plenty of people, both internally and externally, seem to have flagged an association with Lidl along the way and Tesco took no action to amend its in-store advertising to mitigate this mis-association. Indeed, the decision was nevertheless taken to launch and continue with the Clubcard Prices campaign.
An interesting point that comes out of the decision is that reputation claims are not just the preserve of high-end, luxury brands. Lidl’s reputation was found to be in its value proposition, and it is precisely this reputation of affordability that Tesco was held to be capitalising upon. Clearly, all supermarkets are constantly battling for market share and the cost-of-living crisis means there is an acute focus on value for money, so we may see more of this type of reputation claim in the future.
Many of the issues discussed in this case could be re-examined on appeal. The findings on bad faith and evergreening will likely also be clarified in the context of the Supreme Court’s decision in Skykick due later this year. It is certainly difficult to reconcile the Court’s finding on genuine use in this case, with its parallel finding of a lack of intention to use the same mark. This seems an aspect that Lidl may wish to challenge in any cross-appeal.
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